Moving into a former home and PRR?

Moving into a former home and PRR?

14:34 PM, 15th November 2021, About 2 weeks ago 3

Text Size

Hi, this question mainly relates to Capital Gains Tax (CGT) and Principal Private Residence Relief (PRR). I know you are going to tell me to speak to my advisers, but they are simply not property experts and just don’t know.

In the not too distant future, I am thinking of moving back to a property I originally bought as my principal home. I moved away with work after about 7 years and let it out. This could work for me for a couple of years as it’s a nice area, and it may also improve my CGT position.

I understand that PRR was changed a few years ago and Lettings Relief was scrapped. So my 2 questions are:
– Would I have to redeem my BTL mortgage and set up a new residential mortgage.
– If the property became my main home again would I be exempt for CGT under PRR rules, or does just the years in occupation calculated against total years owned apply.

Any knowledge on this topic is much appreciated.

Adrian

Editor’s Note:

Please see HMRC Capital Gains Tax Calculator >> https://www.gov.uk/tax-sell-property/work-out-your-gain

 



Comments

by Neil Patterson

14:41 PM, 15th November 2021, About 2 weeks ago

Hi Adrian,

I have added the HMRC CGT calculator link at the bottom of the article.

A residential mortgage is cheaper and the lender because it is regulated is highly likely to require you to swap.

by Simon Lever

16:30 PM, 15th November 2021, About 2 weeks ago

Hi Adrian
The gain on a residential property is apportioned between the time it was your Principal Private Residence (PPR) and the time when it was not, generally it is let for this period.
In addition to the actual time spent there is an additional “free” 9 months added to the PPR period. This period has reduced over the years from 36 months, then 18 months. The period was initially set up to cover an overlap period in case the property could not be sold and there was an overlap with a new property.
If you are required to move away from home for work purposes it may still be considered to be your PPR even though it is let out.
Lettings relief changed in April 2020. Prior to that it was possible to get up to £40,000 of the gain to be ignored for lettings relief. Now, in order to obtain the relief, you have to be living in the property at the same time as the tenant.
If you are considering selling the property please remember there are new rules from April 2021 about the time you have to declare the CGT on the sale and pay the tax. Currently there is a 60 day time limit to make the declaration and pay the tax. This was extended from 30 days in the recent budget.
The declaration is outside of your normal self assessment and a separate CGT tax account needs to be set up with HMRC.
The motgage question would depend on your mortgage conditions and what your plans for the future are. Mortgage interest for self occupation tends to be cheaper than buy to let but if you are going to let it again in the future you will have to consider if you would have to re-mortgage again.

by Theresa

16:51 PM, 15th November 2021, About 2 weeks ago

I suggest taking time to read HMRC manuals and relevant sections of TCGA 1992. Then get advice from chartered tax adviser, if still not clear. PPR is too complex for this forum, and advice above is incomplete. 9 month exemption only applies to final nine months of ownership. You can only ever have one PPR at a time. If you have had legal interest (tenancy agreement or ownership) in another residence in that period you will have needed to have made an election. There are complexities and another exemption to consider. Do the suggested reading.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER